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Industrial Policy, Employer Size, and Economic Performance in Sweden

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Author Info
Steven J. Davis
Magnus Henrekson

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Abstract

The pre-1990 Swedish tax system strongly disfavored younger, smaller and less capital-intensive firms and sectors and discouraged entrepreneurship and family ownership of businesses in favor of institutional ownership. Credit market regulations, the national pension system, employment security laws and centralized wage setting in Sweden reinforced the distortionary impact of the tax system. We describe the relevant Swedish policies and institutional arrangements, and we explain why the attendant distortions are likely to have hampered the efficient allocation of resources, reduced productivity, and retarded economic growth and recovery. We also develop evidence on the consequences of these distortions for the size structure and industrial distribution of employment. Taking the U.S. industrial distribution as a benchmark that reflects a comparatively neutral set of policies and institutions, Sweden's employment distribution is sharply tilted away from lower wage industries, less capital-intensive industries, and industries characterized by greater employment shares for smaller firms and establishments. Compared to other OECD economies, Sweden has the lowest rate of self employment, a dominant role for larger firms, and highly concentrated ownership and control of private-sector economic activity.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5237.

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Date of creation: Aug 1995
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Handle: RePEc:nbr:nberwo:5237

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Find related papers by JEL classification:
L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

References listed on IDEAS
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  1. Sherwin Rosen, 1996. "Public Employment and the Welfare State in Sweden," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 729-740, June. [Downloadable!] (restricted)
  2. Jensen, Michael C, 1993. " The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems," Journal of Finance, American Finance Association, vol. 48(3), pages 831-80, July. [Downloadable!] (restricted)
    Other versions:
  3. Charles Brown & James L. Medoff, 1989. "The Employer Size-Wage Effect," NBER Working Papers 2870, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Stefan Fölster & Sam Peltzman, 1993. "The Social Costs of Regulation and Lack of Competition in Sweden," University of Chicago - George G. Stigler Center for Study of Economy and State 91, Chicago - Center for Study of Economy and State.
  5. Steven J. Davis, 1992. "Cross-Country Patterns of Change in Relative Wages," NBER Working Papers 4085, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932.
  7. Edward E. Leamer & Per Lundborg, 1995. "A Heckscher-Ohlin View of Sweden Competing in the Global Market," NBER Working Papers 5114, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Leamer, E.E. & Lundborg, P., 1995. "A Heckscher-Ohlin View of Sweden Competing in the Global Marketplace," Research Institute of Industrial Economics Working Papers 437, Research Institute of Industrial Economics (IFN).
  9. Morck, Randall & Shleifer, Andrei & Vishny, Robert W., 1988. "Management ownership and market valuation : An empirical analysis," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 293-315, January. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Juha Kilponen, 2005. "On the Efficiency of Job and Income Protection in the Dynamic Labour Markets," Labor and Demography 0509008, EconWPA. [Downloadable!]
    Other versions:
  2. Blomström, Magnus & Kokko, Ari & Sjöholm, Fredrik, 2002. "Growth & Innovation Policies For a Knowledge Economy. Experiences From Finland, Sweden & Singapore," EIJS Working Paper Series 156, The European Institute of Japanese Studies. [Downloadable!]
  3. Henrekson, Magnus & Rosenberg, Nathan, 2000. "Incentives for Academic Entrepreneurship and Economic Performance: Sweden and the United States," Working Paper Series in Economics and Finance 362, Stockholm School of Economics. [Downloadable!]
    Other versions:
  4. Henrekson, Magnus & Jakobsson, Ulf, 2003. "The Swedish Model of Corporate Ownership and Control in Transition," Working Paper Series in Economics and Finance 521, Stockholm School of Economics, revised 16 Apr 2003. [Downloadable!]
    Other versions:
  5. Steven J. Davis & Magnus Henrekson, 1997. "Explaining National Differences in the Size and Industry Distribution of Employment," NBER Working Papers 6246, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Henrekson, Magnus, 2002. "Entrepreneurship: A Weak Link in the Welfare State," Working Paper Series in Economics and Finance 518, Stockholm School of Economics, revised 04 Mar 2005. [Downloadable!]
    Other versions:
  7. Davis, Steven J. & Henrekson, Magnus, 1997. "Explaining National Differences in the Size and Industrial Distribution of Employment," Working Paper Series 482, Research Institute of Industrial Economics. [Downloadable!]
    Other versions:
  8. Douhan, Robin & Henrekson, Magnus, 2007. "The Political Economy of Entrepreneurship," Working Paper Series 716, Research Institute of Industrial Economics. [Downloadable!]
  9. Erixon, Lennart, 2005. "Travelling Along the Third Way. A Swedish Model of Stabilisation, Equity and Growth," Research Papers in Economics 2005:10, Stockholm University, Department of Economics. [Downloadable!]
  10. Davidsson, Per & Henrekson, Magnus, 2000. "Determinants of the Prevalence of Start-ups and High-Growth Firms," Working Paper Series in Economics and Finance 381, Stockholm School of Economics, revised 26 May 2002. [Downloadable!]
    Other versions:
  11. Douhan, Robin & Henrekson, Magnus, 2008. "Productive and Destructive Entrepreneurship in a Political Economy Framework," Working Paper Series 761, Research Institute of Industrial Economics. [Downloadable!]
  12. Henrekson, Magnus & Jakobsson, Ulf, 2000. "Where Schumpeter was Nearly Right - The Swedish Model and Capitalism, Socialism and Democracy," Working Paper Series 533, Research Institute of Industrial Economics. [Downloadable!]
    Other versions:
  13. Henrekson, Magnus & Rosenberg, Nathan, 2000. "Designing Efficient Institutions for Science-Based Entrepreneurship: Lessons from the US and Sweden," Working Paper Series in Economics and Finance 410, Stockholm School of Economics. [Downloadable!]
    Other versions:
  14. Johansson, Dan, 1997. "The Number and the Size Distribution of Firms in Sweden and Other European Countries," Working Paper Series 483, Research Institute of Industrial Economics. [Downloadable!]
    Other versions:
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